Financial Inclusion and digitisation of Self Help

Groups

……an Indian experience

1.27 billion population

(17% of the world )

India: Country statistics

74% 60

%

22%

Lit

er

ac

y

Ag

ric

ult

ur

e

de

pe

nd

en

t

Po

or

70%

Ru

ra

l

India’s Economy

Area GDP

329 Million Hectares

$ 2.2 Trillion

Priority Sector Credit Flow

2011

2017

$ 191 Billion

$ 373 Billion

Of which Agriculture

$ 72 Billion

$ 164 Billion

Banking Structure in India

NABARD

RBI

NHBSIDBIEXIM Bank

PSU Banks 20

Private Banks

21

LABs3

Foreign Banks

43

Small Finance Banks

9

RRBs56

Payment Banks

4

Coop Banks (ST +LT)1042

NABARD – a development FI“Committed to rural prosperity…..’’

Vision

“Development Bank of the Nation for fostering rural

prosperity”

Mission

“Promote sustainable and equitable agriculture and rural

development through participative financial and non-

financial interventions, innovations, technology and

institutional development for securing prosperity”

6

NABARD’s major

functions

Credit

Developmental

Supervisory

FI and microfinance

NABARD’s - Financials

7

CAR – 17.71%

Development spends–USD 142 million

Net Worth –

USD 4.8 billion

Profit after Tax –

USD 408 million

Balance Sheet size – USD 57 billion (30th Sept.2017)

Refinance to RFIs,

MFIs 29

Direct Finance for Rural Infra,

Food Process. etc.

21

Investments5

Others2

$ BILLION

36% 53%

8%

3%

Financial Inclusion in India: Journey since India’s independence

Year Event

1969-71 Nationalization of major Private Banks

1972 Mandatory system of Priority Sector Lending

1975 Establishment of Regional Rural Banks

1982 Establishment of NABARD

1992-96 Piloting and mainstreaming of SHG movement

Financial Inclusion in India: Journey since India’s independence

Year Event

1998 Kisan Credit Card scheme for hassle free farm credit

2008 Use of Banking Correspondents for increasing outreach

2011 Policy for regulating MFI operations

2014 Launch of PMJDY - large scale opening of savings A/cs by banks

2016 Large scale initiative to promote digital transactions

Govt. of India: JAM Trinity

• PMJDY a Mission for universal access to banking, insurance & pension.

• Aadhaar as Identity – A source of identity for Direct Benefit Transfers.

• Micro Insurance & Micro Pension: Life, Accident & Crop Insurance and

Pension linked to bank accounts for easy settlement of claims

• Mobile as Outreach Mechanism

• UPI, BHIM, Aadhaar Pay, e-KYC

NABARD’s FI initiatives

• Promoting Tech’logy in Rural Coop. Banks - CBS implementation

• Computerisation of grassroots cooperatives (PACS)

• Promoting digital transactions in rural India

• Easing net connectivity for rural banks in backward areas

• Promoting Financial literacy in rural India

• Provided start up capital to MFIs for leveraging bank loans

• Supporting Banks and MFIs with refinance

11

What is SHG? Avoluntary association of10-20 poor people,preferably from the samevillage & socio-economicbackground who cometogether to save and lendto each other. These groupsevolve over time to savewith Commercial Banksand leverage loans……….

SHG a unique innovation for increasing bank outreach

What makes SHGs unique?

Social Capital

Technology Capital

Financial Capital

Informal nature and decentralised

design

Community based, Savings-led

Door step financial services

Democratic functioning

Reduction in transaction costs of banks

Creation of social capital and

sustainable inclusion thro livelihoods

Unregistered groups (SHGs) as business clients of banks

Six months of incubation

Banks lend to SHGs based on credit plan for on-lending

Social collateral a good substitute

Mandatory savings inculcate discipline

Effective instrument which helps fulfil at least 10 SDGs

SBLP – The Largest community based Micro Finance

programme in the world

8.5 million SHG100 million Rural HHs

Core elements of Self Help Groups

Growth of SBLP in India 0

.2

m n

2000

Journey started with500 odd SHGs in 1992has today touches thelives of 100 million ruralhouseholds in India.

7 M

illi

on

8.5

Mil

lio

n

2010 2017

CreditAround $36 Billion credit accessed by SHGs since 1992

2000 20102017

$ 2

3

Mn

$ 2

.2

Bil

lio

n

$ 6

Bil

lio

n

Physical growth – Cumulative Financial growth in Savings & Bank Credit

$4

4

Mn $ 9

54

M

n

$ 2

.5 B

n

Savings

2000 2010 2017

Challenges faced by SHG ecosystem

• Manual book keeping

• SHGs formed – Quality issue

• Multiplicity of membership

• Lack of transparency

• Unavailability of Credit history of members

• Limited manpower in banks

• No Credit rating - Rising NPA levels

Is there a Game Changing Solution to

address some of the challenges???

EShakti: Digitisation of SHGs

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E-book keeping of SHGs

Enable Bankers ease of doing business with SHGs

Credit grading of SHGs

Enable social intermediation

Use technology as enabler of multiple interventions

Major players: NABARD, GOI, NGOs, Banks, Govt. agencies, CSR of

Cos, credit rating agencies etc.

Challenges addressed by EShakti

• Transparency of group operation

• Accountability of members in group mode

• Accuracy of financial records

• Bringing Good governance among SHGs with above three

19

Empowerment on fingertips

Mobile based • Vernacular app

Access to all stakeholders

• Cloud based

SMS alerts to all members

• Nominal fee

20

enables them to update their transactions in real time

• Introduction of technology to rejuvenate the sector

• Reignite Bankers interest in banking with SHGs

• pilots for digitisation of SHGs:

• Covers 0.15 Million SHGs in 25 districts across 19 States and 1 U.T.

• Concurrent grading

• Credit deepening to quality SHGs

• Business planning for bankers to scale up SHG portfolio

• Add on services like micro insurance, micro pension and social inputs

Benefits with Digitisation

• Exponential growth in credit– 20% in 5 mths

• Livelihood to 70k poor women- Agriculture and allied activities

• Savings of SHGs gone up by 100%

• Repayment rates have gone up

• Comprehensive FI - Savings, Credit, Insurance, remittances, pension made possible

• Member satisfaction due to increased transparency

• Enquiry for business on the profiles collected

• Bankers actively seeking SHG portfolio

22

Replication and scaling up

• Present NABARD driven initiative in 100 districts

• GOI’s SHG programme replicating EShakti

• Scaling up and Replication possible in all 650 districts

• NABARD in dialogue with GoI for nation wide expansion

• Mobile penetration to grow in India

• Eventually each SHG to self manage

For more details, please visit

https://eshakti.nabard.org 23

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……………………..miles to go before I sleep…….

THANK YOU